Quick Thoughts On Oil, Bitcoin And Gold

I have about had it with the chasers, know-it-alls and greater fools right now. I'm telling you, the investor attitudes, lack of education and inexperience are very similar to 2007 and 1999 right now. The Millennials are in big trouble soon. They are about to get their first big fleecing. They should listen to me, I'm on their side, but boy, oh, boy, are the an interesting group.

I don't know if it's arrogance, ignorance, self-loathing, entitlement or some weird combination that makes Millennials think they are somehow smarter than those who came before them, but that is the vibe they throw off. They certainly don't like to stand on the shoulders of giants. That's how I got a boost and I think they should take the lesson.

In any case, I have three articles in the keyboard right now that will be out this weekend and early next week as a response to things I'm seeing and hearing, they are:

Oil Bears Are As Wrong As When They Were Bulls

Cryptocurrencies, The Definition Of Money And Tulip Bulbs

Gold Is Just A Rock, But Gold Miners Might Rock

Here's the skinny.

Oil

The supply and demand dynamics for oil are much tighter than people realize. Frackers are simply not going to ruin the party by pumping too much. How do I know this. I freaking called and asked. They are fully aware that they create bigger free cash flows by waiting until summer to do anything beyond fill holes in the their chains.

Demand for oil is rising with a growing economy. The oil producers have a tailwind and they know it. They won't start pumping more until oil gets to about $80 per barrel and then they won't pump too much to lower that price. I expect $80 per barrel to hold a long time unless I'm right about war in Iran, in which case oil blows by $100.

If you are using LEAPs, I like the Encana January 2019 $10 and $12 calls/LEAPs, try to get those at the bid using a limit order for the day. I also like the XOP January 2020 $37 calls/LEAPs, again, use a limit order for the day to try to get it at the bid. Move up your prices by nickels, not dimes, as there is a lot of volatility.

Cryptocurrencies

Bitcoin is a scam. Probably a really epic one. Who created it? How much is there really? How does it keep getting stolen? Why are over 80% of the transaction of Bitcoin coming out of China? (Can you say capital flight and money laundering?)

A few cryptocurrencies will survive. The ones that the banks decide to use to clear wire transfers will be the ones the exist in a few years. Ask yourself, why, in a day of such technology are wire transfers not instant. Blockchain technology using a small handful of cryptocurrencies will be used to solve instant money transfers between banks.

Because the banks adopt it, those cryptos will meet the definition of money. Currently, none of the cryptocurrencies fulfill the definition of money:

Money...

1. is a medium of exchange that settles payments. Money can be used in exchange for goods and services. I will give you $10 for a hamburger, fries and a soft drink.

2. is a unit of account, i.e. it serves as a way to communicate the price of goods and services. Prices are expressed using monetary expressions. A MOSI member'snew Tesla (TSLA) Model S cost $70,000.

3. is a store of value over time and across people, firms, countries. A store of value serves to as vehicle to hold onto value over time that can be used as mediums of exchange or be sold to obtain more liquid mediums of exchange. There are many stores of value, however, money also satisfies being a medium of exchange and unit of account as well. Some artwork is a store of value, but it is not money.

In today's central bank driven world, the value of money, and in fact, the definition of money has been bastardized for a whole new generation. The Millennials are running face first into a buzz saw and they don't even know it because their cell phones didn't tell them so.

I will be very blunt here. Those who are chasing Bitcoin (COIN)(OTCQX:GBTC) and most other cryptocurrencies, are about to get crushed by those same central banks that helped crash the world economy a decade ago and helped fix it over the past decade, as well as, governments that don't like to be challenged, i.e. all governments.

Gold

Gold (GLD) (IAU) is about fairly valued given supply, demand and the cost to extract it. But that's current. Demand appears poised to increase soon. That should drive gold towards $1500-2000 per ounce over a few years form today's $1350. That's pretty good. But not great.

The real winners will be the newly slimmed down gold miners (GDX). Many of them are in good shape now or on the verge and a lot of competition is gone. Mines have closed, projects have been cancelled and companies have gone bust. What other commodity industry does that sound like?

I am exploring buying some GDX. I'm not sure how yet. But I think it's coming to our portfolios soon. I will try to find a couple companies too, but could use a little help if anybody is headfirst into gold. I do have a contact I'll call.

Disclosure: I am/we are long ECA, XOP.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I own a Registered Investment Advisor - https://BluemoundAssetManagement.com - however, publish separately from that entity for self-directed investors. Any information, opinions, research or thoughts presented are not specific advice as I do not have full knowledge of your circumstances. All investors ought to take special care to consider risk, as all investments carry the potential for loss. Consulting an investment advisor might be in your best interest before proceeding on any trade or investment.